Share this report:
January 2021 | Issue 230
Vaccine boosts credit as PE firms open up to bridge loans
Hugh Minch
The leveraged loan and CLO markets ended 2020 on a long-awaited high after multiple vaccines for covid-19 were rubber-stamped by regulators.
As Creditflux goes to press, the US Food & Drug Administration has confirmed the safety and efficacy of the shot developed by BioNTech and Pfizer, while the UK has begun vaccinating. The apparent success of other vaccine manufacturers only adds to the optimism coursing through credit.
The market’s reaction to the good news has been swift after months of painful endurance for managers and investors amid the pandemic. The S&P/LSTA leveraged loan index rose from 93.71 cents on 5 November, to 95.11 cents on the dollar by the end of the month.
“Risk appetite has improved relative to what it was before the vaccine news came out,” says one CLO collateral manager, whose firm priced a transaction in early December. He adds that high-quality loans are trading above par on an ask basis in the secondary market. “Good loans are oversubscribed at cheap prices, but are getting more expensive by the day.”
“Negotiating bridge loans with sponsors has become easier”
Himani Trivedi, Head of structured credit | Nuveen
CLO liabilities have rallied across all rating bands since the vaccine announcement. US triple A CLOs have tightened 21.69 basis points since early November, according to data from Prytania Solutions, while US double Bs have come in a huge 128.15bp during the same period.
With the end of the pandemic in sight, CLO managers are now asking which companies have sufficient liquidity to survive until the second quarter of 2021, when the vaccine roll-out is expected to be completed, and which companies require bridge loans to get to the other side.
Negotiating bridge loans with sponsors has become easier since the vaccine announcement was made, says San Francisco-based Himani Trivedi, head of structured credit at Nuveen. “Now that there’s a finite aspect to the restrictions and many of these companies will be able to come out the other end, everybody is being more flexible.”
In a sign of the changing winds, Moody’s placed 188 CLO tranches worth $5.6 billion on review for possible upgrade in December 2020.
Share this article:
Global credit funds & CLO's
January 2021
| Issue 230
Published in London & New York.
Copyright Creditflux. All rights reserved. Check our Privacy Policy and our Terms of Use.